AIM Report: The Missing Enron Witness

by AIM Reporton March 14, 2002

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When Enron executives and former executives appeared before Congressional committees some took the First Amendment. Former CEO Jeffrey Skilling did not, but his memory was poor and two other witnesses contradicted him. He was asked if Clifford Baxter, the former Enron vice chairman who had been found dead in his car, had killed himself because of the Enron scandal. Skilling said yes, that Baxter was “heartbroken” because his reputation was ruined. He said Baxter had told him that it was like being accused of being a child molester.

Baxter, like Sherron Watkins, a key whistleblower at Enron, had expressed his concerns about Enron’s financial health early in 2001. On Feb. 14, Watkins told a subcommittee of the House Energy and Commerce Committee that last March Baxter had told Skilling, “We are headed for a train wreck, and it is your job to get out in front and try to stop it.” Skilling had a different story. He testified that he had asked Baxter if he had any reason to think anything bad was going on, and that Baxter said, “No.”

Baxter’s reputation was that of a straight arrow, and his friends believe that he would have testified truthfully. Sherron Watkins said he had “complained mightily” to Chairman Lay about the partnerships that Enron created to conceal its debts, inflate its profits and siphon off millions of dollars for some officials and investors. Baxter specifically criticized the LJM2 partnership, about which Lay claimed to know little. The Wall Street Journal reported the discovery of a document pertaining to LJM2 signed by Lay that indicated that he knew more than he cared to admit.

Baxter was found at 2:23 a.m. on Jan. 25 slumped in the driver’s seat of his Mercedes, parked in a median turn-off near his home in Sugar Land, Texas. A handgun was found in the car. The police have not revealed if it was his gun or if his fingerprints were on it. They also have a note, which has been described as a suicide note, but they won’t release it, reveal its contents, say if it is in his handwriting, if it bears his fingerprints, where it was found and who found it. The autopsy report says that the entrance wound in his right temple was 4.5 x 7.2 centimeters. It was caused by pellets no more than 2 millimeters in diameter fired from a handgun. This is called “rat shot.” It is used to kill rodents and snakes. The pellets can’t be traced to a particular gun. The police have not revealed if Baxter owned a gun and any rat-shot shells. There was no exit wound.

The Sugar Land police quickly issued a press release headlined “Suicide.” The chief of police, realizing that was inappropriate before any investigation was made, quickly ordered that changed to “Death Investigation.” They were not going to have an autopsy until family members pressured a justice of the peace to order one. It was performed in Houston 14 hours later. The report showed evidence of a painkiller in the blood and two different sleeping tablets in the blood, stomach and liver. It makes no statement about suicide or homicide, but the medical examiner told reporters the findings were consistent with suicide, and the media have been calling it that ever since.

The New York Times reported that the police had concluded it was suicide, saying he “had been shot once in the head with a thirty-eight caliber handgun” and that he “had left a note.” It said he had been subpoenaed by a Senate committee, that a House committee wanted to talk to him and that the FBI was looking into his death. It also reported that a friend had called Baxter the day before his death to congratulate him for having been a whistleblower at Enron. The friend revealed that someone had suggested that Baxter hire a bodyguard. He commented, “I’m a businessman. Why do I need a bodyguard?”

When Sherron Watkins testified on Feb. 14, Rep. Greg Ganske (R – IA) asked about a note she had written warning Ken Lay of the practices that led to Enron’s bankruptcy. He asked if she had put a copy of it in a safe place. She said she had put a copy in a lock box that was not in her office nor in her home.

Ganske then asked her if she was worried about her personal safety. She replied, “At times. I mean just because the company was a little radio-silent back to me, so I didn’t know how they were taking my memos or the investigation.” Ganske asked, “Why would you be worried about your personal safety?” She said, “Because it was the seventh largest company in America.”

Asked by Rep. Peter Deutch (D – FL) if she had done anything based on fear of her personal safety, Watkins responded, “I did actually talk with some Enron Security personnel….In effect, Mr. Fastow potentially lost his job because I brought up these concerns. And I actually talked to Enron security personnel about whether I should do anything different, more concerned that Mr. Fastow might be vindictive.” [Fastow had been the chief financial officer.]

This dialogue ensued. Deutch: Did they give you advice to take any specific actions? Watkins: Just general security advice. Deutch: Did Mr. Fastow exhibit any violent behavior or erratic behavior that would lead you to- Watkins: No, no. It’s just I did not feel very much support. I did feel a little bit as if I were a lone fish swimming upstream, and so it starts to wear on you that it’s you against them, and I was a little bit concerned. Deutch: Are you convinced that Mr. Baxter’s death was a suicide….? Watkins: I’m sure the authorities have reported that correctly.

Deutch asked her twice if there was any doubt in her mind that it was a suicide. First she replied, “Probably not, no.” The second time, she said, “Yes. I, I, I believe it probably was.” Deutch said, “If you say ‘probably,’ there’s doubt.” Watkins then said, “It’s just a sensitive topic that I’d rather not comment on.”

The New York Times excerpts from the hearing transcript included Ganske’s questions and Watkins’ replies but not the exchange with Deutch that suggested Watkins was not fully convinced that Baxter committed suicide. USA Today reported her fears for her own safety, but not her doubts about Baxter.

Misdirection is a technique used in magic and sports of getting you to look one way when the real action is taking place else-where. That appears to have been the strategy employed by Enron Corporation. It was able to get conservative journalists such as Bill Kristol and Larry Kudlow to lend it their names, for a fee, by preaching deregulation of energy and financial markets. But it was really pursuing an agenda of global regulation through a treaty that would limit emissions of CO2 and other so-called greenhouse gases. At the same time it was making payments to Kristol and Kudlow, Enron was arranging energy deals through the U.N. with China, which is exempt from the treaty curbs on CO2. Enron chairman Ken Lay was a member of Clinton’s Council on Sustainable Development. He had a working relationship with former Senator Tim Wirth, Bill Clinton’s point man in the global warming battle.

Kristol, editor of The Weekly Standard, took $100,000 from Enron without disclosing the payments at the time. Irwin Stelzer, a contributing editor at the Standard, also took an estimated $100,000. Kudlow accepted almost $50,000 for financial advice and speeches, and Peggy Noonan of the Wall Street Journal said she got $25,000 to $50,000 for helping Enron chairman Ken Lay with a speech and Enron’s annual report. Paul Krugman, a liberal columnist for the New York Times, took $50,000 of Enron money, but Washington Post media reporter Howard Kurtz pointed out that so far “most of the Enron journalists are free-marketeers on the right.”

We know of no evidence that the prominent conservatives who were paid by Enron were aware of the company’s shady financial shenanigans. But they should have known about Enron’s views on the need for emission controls. Its Web site declared, “Enron recognizes that climate change is a global challenge and supports binding, multilateral agreement on systems to solve it.” The statement made clear Enron’s support of the global warming treaty, also known as the Kyoto Protocol to the United Nations Framework Convention on Climate Change. “Lack of scientific certainty does not justify inaction,” the company said, referring to evidence that casts doubt on the theory of man-made global warming.

Enron gave big contributions to Republicans and the Bush campaign, but it didn’t get what it wanted most-Bush’s support for the mandatory restrictions on CO2 emissions contained in the global warming treaty. Bush rejected it because of questions about the science behind the theory and the cost. In an April 23, 2001 article in Business Week, Paul Raeburn said “big corporate names” were disagreeing with Bush on global warming. One of them was Enron. It joined the International Climate Change Partnership and the Pew Center’s Business Environmental Leadership Council, organizations that favor ratification of the Kyoto Protocol.

The Washington Post reporter Dan Morgan reported in a January 13 article that Enron chairman Ken Lay had met with Clinton and Gore to advocate a “market-based” approach to the problem of global warming.” An Enron memo said this would be “good for Enron stock.” Morgan said, “The Clinton administration’s interest in an international agreement to combat global warming also dovetailed with Enron’s business plans. Enron officials envisioned the company at the center of a new trading system, in which industries worldwide could buy and sell credits to emit carbon dioxide as part of a strategy to reduce greenhouse gases. Such a system would curtail the use of inefficient coal-fired power plants that emitted large amounts of carbon dioxide, while encouraging new investments in gas-fired plants and pipelines-precisely Enron’s line of business.”

Morgan added that Enron officials were elated with the Kyoto Protocol and said it would “do more to promote Enron’s business than almost any other regulatory initiative outside of restructuring the energy and natural gas industries?”

Writing in the Hoover Institution journal, Bruce Yandle noted that Enron endorsed Clinton’s $6.3 billion plan to fight global warming by subsidizing the production and purchase of renewable energy and related technologies. Yandle added, “Kyoto-justified taxpayer subsidies will make life easier for firms like Enron.” Clinton gave them the subsidies in exchange for campaign contributions. Bush gave them nothing.

In a column entitled, “Enron’s Secret Energy Plan,” Robert Novak noted that Lay’s efforts on behalf of the treaty “reached into the Bush Cabinet to Treasury Secretary Paul O’Neill. There is no evidence of direct communication on this issue between Lay and O’Neill. The middleman between them was former Sen. Timothy Wirth, an environmentalist who is now president of Ted Turner’s billion-dollar United Nations Foundation. Lay tried hard to harness O’Neill’s indiscreet enthusiasm for the global warming cause to a commercial bonanza for Enron.”

While it tried to gain an advantage for natural gas against oil and coal here in the U.S., Enron was involved in a United Nations conference to develop China’s coal resources. China is exempt from the restrictions on carbon dioxide emissions in the Kyoto pact. This conference led to the U.S. taxpayer-funded United Nations Development Program (UNDP) providing $10 million in the area of “climate change” to assist Enron in a scheme to develop Communist China’s coal resources. China, the biggest coal producer in the world, got the money for coal-bed methane projects conducted in association with Enron and Amoco back in 1997. The UNDP receives about $87 million a year from the U.S.

The U.N. Foundation and Enron jointly funded a project through a U.N. agency called the “United Nations Economic Commission for Europe.” This so-called “Energy Efficiency Investment Project” was designed to facilitate economic development in the former Soviet Union, including Russia. While spouting deregulation rhetoric, Enron made deals with environmentalists. In return, the radical environmentalists claimed Enron, which staged many “Earth Day” activities, as a true friend. At a dinner in Kyoto during treaty negotiations, Lay was given an award by the Climate Institute. Enron also received an award from the EPA.

The company’s game can be seen in its involvement with James Dehlsen, a member of the board of the radical World Watch Institute who founded Zond Corporation in 1980 and served as Chairman of the Board until its acquisition by Enron Corporation in January 1997. As Chairman Emeritus of Zond, he served on the Board of Enron Wind Corporation until March 2000. Dehlsen served as an advisor to the Department of Energy’s Wind Program, testified at the first U.S. Senate hearings on global warming, and was a delegate to the climate change conference in Kyoto, Japan.

Lay and the environmentalists served together as members of Clinton’s “Presidential Council on Sustainable Development.” Other members included John Adams of the Natural Resources Defense Council, Carol Browner of EPA, Fred Krupp of the Environmental Defense Fund, and Michele Perrault of the Sierra Club. The creation of this group through executive order 12852 was another effort to implement the global environmental agenda. Analyst James M. Sheehan said the concept of sustainable development entails “controlled economic development” and political control of consumption levels-i.e., living standards. In Florida, where “sustainable communities” have been created with federal assistance, activists have defined “sustainable development” as “This is a stick-up. Give me your property.”

Clinton’s executive order 12852, dated June 29, 1993, mandated that the council should “develop and recommend to the President a national sustainable development action strategy…” The council’s report, Sustainable America: A New Consensus for Prosperity, Opportunity, and A Healthy Environment for the Future, was released in March 1996. Earlier, the council sponsored a “National Forum on Partnerships Supporting Education About the Environment,” producing “Education for Sustainability,” a report calling for integrating the “principles of sustainability into our nation’s educational system.”

Henry Lamb, Executive Vice President of the Environmental Conservation Organization, has said that this process of implementing sustainable development is designed to bypass U.S. constitutional processes by utilizing non-elected individuals, federal bureaucrats, left-wing non-governmental organizations and U.N. agencies. He notes that the concept of sustainable development has never been officially endorsed or embraced by Congress.

It is clear that Enron wasn’t really opposed to government regulation; it just wanted to benefit from it. Its troubled $2.9 billion power plant in India was financed in part through the U.S. government’s Overseas Private Investment Corporation (OPIC). In fact, 19 of 20 projects proposed by Enron between 1993 and 2000 were partially financed by OPIC and the Ex-Im Bank. The Clinton administration provided some $1.2 billion in loans for these projects, worth a combined $4 billion, while Democratic causes received nearly $2 million from Enron.

In 1997, Enron gave an award to Mikhail Gorbachev, who has become a leading proponent of global government in the name of saving the planet from environmental destruction. He stages an annual “State of the World Forum,” drawing luminaries from around the world. Gorbachev received the “Enron Prize for Distinguished Public Service” from the James A. Baker III Institute for Public Policy of Rice University. The Enron Prize was awarded “to men and women who, through their personal and political courage, have made historic contributions to public service in both the domestic and foreign policy fields.”

One of Gorbachev’s main vehicles today is environmentalism. An “Earth Charter” was unveiled at his State of the World Forum in 1995. It can be viewed as sort of a constitution for an emerging world government. Gorbachev has said, “Nature is my God.” Gorbachev, who presided over perhaps the most environmentally irresponsible nation in history, now supports development of a universally binding international code of environmental ethics, saying, “There must be a kind of ten commandments for the environment.”

He occasionally lets it slip that he has not really changed his basic communist philosophy. During a Washington, D.C. appearance, for example, he did not disavow his communist background. “Though he now considers himself a democrat and not a communist,” reported USA Today, “he refuses to dismiss Russia’s communist past.” The paper quoted Gorbachev as saying, “There were certain guarantees of protection for the masses of people” under communism. “The socialist tradition…goes back to Jesus Christ, not (Karl) Marx,” he added. This reference to Christ as a socialist reflects an embrace of so-called Liberation Theology, an effort to peddle Marxism using Christian concepts and phrases.

At the recent World Economic Forum in New York, there was a panel discussion on why so many people, including the press, failed to foresee Enron’s collapse. Gail Fosler, Senior Vice-President and Chief Economist of The Conference Board, compared Enron to the dot-com phenomenon, in which nobody questioned a company’s credentials or financial statements. She said “intellectual intimidation” was at work against anyone who posed even reasonable questions about the company’s practices. Kathleen Hays, an anchor for CNN, said it was difficult for reporters without accounting backgrounds, and with limited resources, to uncover stories such as Enron. “We tend to follow stories that are already stories,” Hays said. She added that “we get hate mail when we report negative stories.”

A New York Times article by Richard Stevenson and Jeff Gerth said that a breakdown in checks and balances encompassed Enron’s auditors, lawyers and directors and “extended to groups monitoring Enron from the outside, like regulators, financial analysts, credit-rating agencies, the media and Congress.” The Times added, “While the press took note of Enron’s high political profile and ties to the Bush campaign in 2000, the company’s financial profile in the media was largely flattering until last year. In March, an article in Fortune by Bethany McLean delved into the unanswered questions about the sources of the company’s profits. Her article was published after Enron’s spokesman and Mr. [Andrew] Fastow, [the chief financial officer], flew to New York to meet with two top Fortune editors in an unsuccessful effort to cast the company in a more favorable light.” They said it was not until after the unexpected resignation of a top Enron official in August did the tone of the coverage become critical.

Washington Post media reporter Howard Kurtz also had praise for the reporting of Bethany McLean of Fortune. Her article asked the basic question: “How exactly does Enron make its money?” She said, “Details are hard to come by because Enron keeps many of the specifics confidential for what it terms ‘competitive reasons.’” McLean quoted financial analysts as saying even they didn’t understand the company. “If you figure it out, let me know,” said credit analyst Todd Shipman. He was reported to be laughing when making that statement. Another said, “Do you have a year?” when asked for an explanation of Enron’s finances. McLean added, “As for the details about how it makes money, Enron says that’s proprietary information, sort of like Coca-Cola’s secret formula.” She quoted an Enron official as saying the company had 1,217 trading “books” for different commodities. He said, “We don’t want anyone to know what’s on those books. We don’t want to tell anyone where we’re making money.”

But Fortune didn’t try to find out. It ran a glowing profile of an “Enron activist” from a book by Gary Hamel, titled, Leading the Revolution. The activist, Louise Kitchen, headed one of Enron’s European operations. She was hailed as someone who pushed Enron “to become a leading online trader of hundreds of products?” A December 18, 2000 Fortune article also sang the praises of Enron. It said, “With revenues in the vicinity of $60 billion, Enron is an awe-inspiring juggernaut. It has offices all over the globe, from London to Rio, Tokyo to Dubai. Its CEO, Kenneth Lay, is considered a visionary who values the intellectual capital of his 18,000-person-strong staff above anything else.”

The fawning over Enron was contagious. Frank Vogl, president of Vogl Communications, gave a lecture in March, 2001, on how Enron was a leader in corporate ethics. He was a senior adviser to something called The Ethics Resource Center. When the history of Enron is written, this lecture will have to go down as an example of the tendency of people in the media and academia to accept anything Enron said about itself. “Integrity is a word that major corporations are recognizing as the best means of describing the fundamental strength and focus of the values-driven corporation,” Vogl said.

He added, “Enron proclaims that a core corporate value is integrity, which means: ‘We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it.’” “The challenge for business,” Vogl said, “is to imbue its brand labels and its multiple relationships with a meaningful sense of integrity.” He quoted Ken Lay as saying in the company’s Annual Report: “Our intellectual capital is our most important asset, and we cherish it. All employees are shareholders. Our values of communication, integrity, respect and excellence are equally applicable to our dealings with each other as with our customers and suppliers.”

The Enron ethics handbook is on its way to becoming a collector’s item. Copies have been auctioned on e-Bay for prices ranging from $5 to $255.